Tonight's Post: Tom Fiddler & the Mortgage Meltdown. What Happened! Where We are Going!

Peter Coy (Business Week) asks: Do We Have a Credit Crunch? Responded to by Leila Search; First Madison Mortgage

Yesterday, a log favorite blogger of mine from BusinessWeek.com, Peter Coy, posed the question:

Do We Have a Credit Crunch? Or Not?

I would usually respond based on my own research or stats but I figured I would pose the question to my favorite lender Leila Search of First Madison Mortgage.

Prime fully documented conforming mortgages are just as easy to come by today as they were before the recent turmoil in the housing and mortgage industry. For those who don’t understand the definition of conforming, it is not just the loan amount ($417,000 or less defined as conforming) that determines whether a loan is conforming or not. Conforming means it conforms with Fannie Mae or Freddie Mac guidelines – these guidelines outline every aspect of the loan from documentation of income and assets, loan-to-value on the property, type of amortization (interest only or fully amortizing), and even condo project approval. Step outside the conforming box and find yourself in credit crunch. Nonconforming loans – not saleable to Fannie or Freddie - are hard to place these days. The entire extent of the affect of “bad loans” is yet unknown and in turn a bit of chaos has struck this segment of the mortgage business.

Looking for stated (unverified) income loan to finance 100% of your purchase price? Think again, whether this is under $417,000 loan amount or not you have stepped outside the conforming box. Looking for a $650,000 loan – expect higher rates and less options as some lenders have stopped offering jumbo loans altogether. Between last Friday and Monday lenders changed guidelines, reduced the amount they would finance, withdrew many financing options altogether, and posted rates over 8%.

Whether you have good credit (prime) or not - expect to find obtaining a mortgage more difficult with stricter documentation requirements on nonconforming loans. Having said that, a credit crunch doesn’t mean the loans are unobtainable. Daily I package loans for first-time homebuyers, 100% financing, stated income to certain loan-to-values, and more. Just don’t expect the ease seen previously - your under 600 credit score without provable income doesn’t cut it these days.

For more info you can contact Leila via email HERE.